Unilever, one of Nigeria’s biggest players in the Fast Moving Consumer Goods (FMCG), space has reported an increase in profit after tax of 143 percent on the back of a decline in operating cost, data from its 2017 full-year financial report shows.
While the consumer goods firm saw an increase in profit of 143 percent to N7.45 billion in 2017, from the N3.07 billion recorded in 2016, its operating cost dropped by six basis points (6bps) in the same period under review.
The firm’s stock price shows that investors are finding it attractive as price rallied some 29.27 percent, outperforming the NSE all-share index of 6.59 percent year-to-date.
Further analysis indicated that the company’s total assets were up by 48.6 billion to N121.1 billion last year, from N72.5 billion two years ago. Total liabilities also fell by 15.6 billion to N45.2 billion in 2017, from N60.8 billion in 2016 at the thick of the recession.
The Central bank Of Nigeria(CBN) decision to restrict specific items from accessing its official window in 2015 placed significant pressure on input costs for FMCGs, as they had to source for foreign exchange (FX) from the parallel market at higher rates to settle import bills which consequently depressed gross margins.
In response to this, several FMCG companies developed backward integration strategies and effective supply chain management to reduce overreliance on imports to militate against exchange rate volatility that has hitherto hampered growth The apex bank also touted the possibility of FX concessions for manufacturing firms who are willing to set up production facilities in the country rather than continually depending on the CBN for FX to import their inputs – and this led to Unilever’s commissioning of a new Blue Band factory in 2017.
Rising input costs and FX constraints, saw gross margins come under pressure for most FMCGs in 2017. This led to several price increases in products as companies responded to keep up with margin expectations. As a result, consumer demand declined, given the strong price elasticity of most consumer items other than the household necessities.
Unilever successfully raised N63 billion via a rights issue last year. Management indicated that the proceeds will be used to settle foreign currency intercompany loans, support working capital and for capacity expansion.
The FMCG recorded a 30.1 percent increase in revenue. This revenue growth in 2017 primarily reflected price increases rather than volume expansion.
MICHEAL ANI
